Trading
Oil falls on demand growth concerns, robust dollar
Global Banking & Finance Review®
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By Jeslyn Lerh
SINGAPORE (Reuters) -Oil prices fell on Friday on worries about demand growth in 2025, especially in top crude importer China, putting global oil benchmarks on track to end the week down nearly 3%.
Brent crude futures fell by 33 cents, or 0.45%, to $72.55 a barrel by 0730 GMT. U.S. West Texas Intermediate crude futures eased 32 cents, or 0.46%, to $69.06 per barrel.
Chinese state-owned refiner Sinopec said in its annual energy outlook released on Thursday that China’s crude imports could peak as soon as 2025 and the country’s oil consumption would peak by 2027 as diesel and gasoline demand weaken.
“Benchmark crude prices are in a prolonged consolidation phase as the market heads towards the year-end weighed by uncertainty in oil demand growth,” said Emril Jamil, senior research specialist at LSEG.
He added that OPEC+ would require supply discipline to perk up prices and soothe jittery market nerves over continuous revisions of its demand growth outlook. The Organization of the Petroleum Exporting Countries and allies, together called OPEC+, recently cut its growth forecast for 2024 global oil demand for a fifth straight month.
Meanwhile, the dollar’s climb to a two-year high also weighed on oil prices, after the Federal Reserve flagged it would be cautious about cutting interest rates in 2025.
A stronger dollar makes oil more expensive for holders of other currencies, while a slower pace of rate cuts could dampen economic growth and trim oil demand.
JPMorgan sees the oil market moving from balance in 2024 to a surplus of 1.2 million barrels per day (bpd) in 2025, as the bank forecasts non-OPEC+ supply increasing by 1.8 million bpd in 2025 and OPEC output remaining at current levels.
In a move that could pare supply, G7 countries are considering ways to tighten the price cap on Russian oil, such as with an outright ban or by lowering the price threshold, Bloomberg reported on Thursday.
Russia has circumvented the $60 per barrel cap imposed in 2022 using its “shadow fleet” of ships, which the EU and Britain have targeted with further sanctions in recent days.
(Reporting by Colleen Howe in Beijing and Jeslyn Lerh in Singapore; Editing by Sonali Paul and Muralikumar Anantharaman)
Brent crude is a major trading classification of crude oil originating from the North Sea. It serves as a global benchmark for oil prices and is used to price two-thirds of the world's oil.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from the U.S. and is known for its light and sweet characteristics.
OPEC+ is a coalition of oil-producing countries that includes the Organization of the Petroleum Exporting Countries (OPEC) and other oil-producing nations. They collaborate to manage oil production levels to influence global oil prices.
Demand growth refers to the increase in the quantity of goods or services that consumers are willing to purchase over a specific period. In the context of oil, it indicates the rising need for crude oil and its derivatives.
A stronger dollar refers to an increase in the value of the U.S. dollar compared to other currencies. This can affect international trade, making U.S. exports more expensive and imports cheaper.
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